The market, S&P500 (C Fund), did a slow grind to new all-time highs on low volume this week. The S fund clearly out-performed while hitting resistance at its upper channel line. For the week, the C fund was up 0.41%, S fund up 2.34%, I fund up 0.52%, and F fund up 0.48%.
Before we get into the market action for the week, I wanted to thank everyone who supported my participation in the Boston Frogman Swim last weekend! There were 36 swimmers that entered (and exited) the water, raising approximately $90,000 for the Navy SEAL Foundation. The USS Constitution Color Guard opened the ceremony, followed by the Boston Police Gaelic Column of Pipes and Drums. As the swim occurred on the 77th anniversary of the invasion of D-Day, we were honored to have in attendance, a small number of the original Amphibious Scouts & Raiders. These men conducted pre-assault operations, to clear beach obstacles, prior to the D-Day assault. The Boston Frogman Swim was a great tribute to these men as well as the SEALs lost since 9/11. It was a fantastic event!
In this post we’re going to look at the differences and benefits of using both weekly and daily charts. The chart is a visual representation of price movement. Using different timeframe charts is like zooming in and out on Google Maps. When you zoom out, you get a better picture of where you’re going but miss the little turns along the way. When you zoom in, you see where you are but, can’t see too far ahead. Both aspects are important to get you where you want to go.
The Long Game vs The Short Game
Do you want to manage your TSP account by playing the Long Game or the Short Game? Do you want to look out months or years into the future and manage your account based on a long time horizon? Or, are you more comfortable managing your account on a more short term, day-to-day basis? Neither is “correct”. What’s important is to pick a time frame that works for your circumstances and risk tolerance. There is always a trade-off!
If you’re playing the long game, looking out months or years, then you only need to look at the charts on the weekends. This is certainly more convenient and less stressful than looking at the charts every day! The trade-off is that you would have to accept intra-week volatility…
Below is an 18 month chart of the C fund where each candle represents 1 week of price movement. The red line is the 10WMA (Week Moving Average) and the blue line is the 50WMA (Week Moving Average Line). The weekly chart is much cleaner and less volatile than the daily chart. If you were playing the long game, you would have moved from the stock funds to the G fund on the Monday following the huge breakdown in the last week of February 2020. Over the next several weeks, price continued much lower. You would have avoided about 2/3rds of the decline. You would then get back into the stock funds when price got above the 10WMA in early April. After that, there were only 2 solid weeks below the 10WMA (mid-Sep and late Nov 2020) that would have required reallocation decisions.
What are the trade-offs to this methodology? Most of us cannot help looking at our account balance. We want don’t want to see our account balance drop. To play the long game, you have to be willing to accept intra-week volatility which means absorbing significant losses along the way. The first week of June 2020 was the first significant down week coming off the March 2020 low. Intra-week volatility was 8% that week. The week ended above the 10WMA so, you would not have reallocated to the G fund. Price consolidated along the 10WMA for several weeks before ultimately moving higher. It took until the 2nd week of July for price to get back to the high of the first week or June.
September thru November of 2020 was even more volatile. If you were strictly following this methodology, you would have done very well over the past 18 months but, allowing those down weeks to play out would be gut wrenching…
The 6 month daily chart of the C fund below is the Short Game. There is much more volatility on a daily basis than a weekly basis. We need to look at the charts every day to effectively play the short game. Managing your account on a daily basis can get you out of the stock funds sooner at the beginning of a significant decline. It can also get you back into the stock funds sooner after a significant bottom. The trade-off here is you are making more frequent decisions but absorbing much smaller losses along the way.
The C fund is at new all-time highs but, price has not exploded higher following recent support at the 50DMA. If I were in the C fund right now, I would not be selling but I would not IFT into the C fund either. I need to see a follow thru day or consolidation back to the 50DMA before getting back into the C fund.
On a weekly basis, the S fund could be setting up for a serious breakout. I need to see a follow thru weekly candle that closes higher than the February high before getting back into the S fund.
On a daily basis, the S fund has hit its upper channel line. It has not been able to break thru this price level. A continuation of the consolidation pattern would require the S fund to roll over in the coming days. We need to let this continue to play out…
On a weekly basis, the I fund chart looks great! The I fund has been riding its 10WMA since the huge gap up in November 2020. Based on the weekly chart, if I was in the I fund, I would not be selling here. But, I would not be buying the I fund here either. It’s very extended above the 10WMA and way above the 50WMA.
On a daily basis, the I fund is a bit more interesting. Price has managed to push above resistance at the upper channel line. This is certainly bullish. I would not sell the I fund based on this chart but, I want to see either a consolidation back to the 50DMA or a follow-thru day, on big volume, before buying back into the I fund.
On a weekly basis, the F fund chart is a definite buy. After bottoming in March 2021, the f fund has recovered, stabilized along its 10WMA and gave us a huge breakout this week. The only negative in the chart below is that volume was lower than last week.
The daily chart really shows the huge breakout on the F fund this week. This is a great looking chart, except for volume on the breakout.
Looking at both the Weekly and Daily charts gives us a much more wholistic view of the market than one time frame alone. There are pros and cons to following just a Long Game or just a Short Game strategy. To make the best decisions, you need to understand both timeframes and make decisions based on your personal circumstances and risk tolerance.
Have a great week!